Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Mitsubishi Heavy Industries / Equity Bottom-Up

<ul>
<li>Laser wireless power transmission technology opens new defense, dual-use and civilian market opportunities. </li>
<li>Japanese politicians inclined to spend more on defense, but worried about the national budget. Likely to split the difference between 2% of GDP and Trump's demands. </li>
<li>Aircraft, Defense &amp; Space to drive sales and profit growth through 2030. Buy on dips for the long term.</li>
</ul>


Laser wireless power transmission technology opens new defense, dual-use and civilian market opportunities. 
Japanese politicians inclined to spend more on defense, but worried about the national budget. Likely to split the difference between 2% of GDP and Trump's demands. 
Aircraft, Defense &amp; Space to drive sales and profit growth through 2030. Buy on dips for the long term.


MHI (7011 JP): Laser Power Transmission Positive, Political Support Unclear

Global Materials | Industrials | Commodities

Rahul Jain

<ul>
<li>MHI posted Q1 FY25 revenue +7% and business profit +25% with resilient Energy/Aero margins.</li>
<li>Orders/Backlog/Guidance: Order intake fell 4% on tough comps, but backlog hit a record ¥10.8 tn (2.1× cover); FY25 guidance of ¥4.95 tn revenue and ¥380 bn profit maintained.</li>
<li>Valuation/Growth: Shares trade at ~19× FY27E EV/EBITDA vs peers at 10–15×, supported by 5–6% revenue CAGR and ~9–10% EPS CAGR through FY28.</li>
</ul>


MHI posted Q1 FY25 revenue +7% and business profit +25% with resilient Energy/Aero margins.
Orders/Backlog/Guidance: Order intake fell 4% on tough comps, but backlog hit a record ¥10.8 tn (2.1× cover); FY25 guidance of ¥4.95 tn revenue and ¥380 bn profit maintained.
Valuation/Growth: Shares trade at ~19× FY27E EV/EBITDA vs peers at 10–15×, supported by 5–6% revenue CAGR and ~9–10% EPS CAGR through FY28.


MHI (7011 JP) Q1 Beat: Record Backlog & Policy Tailwinds Support Premium Valuation

<ul>
<li>MHI has delivered a strong turnaround over the past four years, with revenue up 26% and business profit expanding nearly 10x from FY22 to FY25</li>
<li>The consolidated order backlog crossed ¥10.2 trillion in FY25, up ~22% YoY, offering ~2 years of forward revenue visibility and skewed toward high-margin Energy and Defense segments.</li>
<li>While the stock has rallied sharply, management’s solid FY25–30 guidance, along with structural tailwinds from energy transition and defense spending, continue to underpin the long-term thesis.</li>
</ul>


MHI has delivered a strong turnaround over the past four years, with revenue up 26% and business profit expanding nearly 10x from FY22 to FY25
The consolidated order backlog crossed ¥10.2 trillion in FY25, up ~22% YoY, offering ~2 years of forward revenue visibility and skewed toward high-margin Energy and Defense segments.
While the stock has rallied sharply, management’s solid FY25–30 guidance, along with structural tailwinds from energy transition and defense spending, continue to underpin the long-term thesis.


Mitsubishi Heavy (7011) – Strong Earnings, ¥10.2T Backlog, Macro Tailwinds Remain Supportive

<ul>
<li>MHI is up nearly 60% year-to-date to 46x management's EPS guidance for FY Mar-26 and 27x our EPS estimate for FY Mar-30.</li>
<li>By then, we expect Air, Defense &amp; Space revenues to double and the division's operating margin to rise from 10% to 15%, which is the likely cap on profitability. </li>
<li>Given Japan's uncertain finances and the long time horizon that should already be discounted, we recommend profit taking. </li>
</ul>


MHI is up nearly 60% year-to-date to 46x management's EPS guidance for FY Mar-26 and 27x our EPS estimate for FY Mar-30.
By then, we expect Air, Defense &amp; Space revenues to double and the division's operating margin to rise from 10% to 15%, which is the likely cap on profitability. 
Given Japan's uncertain finances and the long time horizon that should already be discounted, we recommend profit taking. 


Japan Specialist

Mark Chadwick

<ul>
<li>MHI reports impressive YoY growth in order intake, revenues, and profits across Energy Systems and Defense Equipment segments in Q2 2023.</li>
<li>Despite a 62% YTD stock price increase, strong order backlog and underlying drivers suggest resilience in a challenging economic climate.</li>
<li>The company benefits from global trends in decarbonization and increased national security spending, positioning itself as a leader in gas turbines and defense technology.</li>
</ul>


MHI reports impressive YoY growth in order intake, revenues, and profits across Energy Systems and Defense Equipment segments in Q2 2023.
Despite a 62% YTD stock price increase, strong order backlog and underlying drivers suggest resilience in a challenging economic climate.
The company benefits from global trends in decarbonization and increased national security spending, positioning itself as a leader in gas turbines and defense technology.


Japan

Mitsubishi Heavy Industries, Ltd. is a comprehensive heavy machinery maker. The Company manufactures machinery, ships, turbines and engines, prime movers, aircrafts, and machine parts for military and commercial use.  Mitsubishi Heavy Industries also researches and develops nuclear power plants.

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Mitsubishi Heavy Industries (7011 JP)

MHI (7011 JP): Laser Power Transmission Positive, Political Support Unclear

Political support for a Japanese defense budget in excess of 2% remains uncertain, but profit likely to grow through 2030. Laser power transmission...

Scott Foster

MHI (7011 JP) Q1 Beat: Record Backlog & Policy Tailwinds Support Premium Valuation

MHI reports strong Q1 FY25 results with revenue and profit growth, record backlog, and solid growth prospects driving higher valuation compared to...

Rahul Jain

Mitsubishi Heavy (7011) – Strong Earnings, ¥10.2T Backlog, Macro Tailwinds Remain Supportive

MHI's strong turnaround in revenue and profit, backed by a solid order backlog and promising guidance, supports long-term growth potential despite...

Rahul Jain

MHI (7011 JP): Take Profits

Take profits, but don't short the stock without an obvious catalyst (high valuation doesn't count). Rising Japanese defense outlays should drive...

Scott Foster

MHI (7011) | Rockets and Renewables

MHI reports strong growth in Q2 2023, benefiting from global trends in decarbonization and defense spending, positioning itself as a leader in gas...

Mark Chadwick

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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MHI (7011 JP): Laser Power Transmission Positive, Political Support Unclear

Political support for a Japanese defense budget in excess of 2% remains uncertain, but profit likely to grow through 2030. Laser power transmission...

Scott Foster

MHI (7011 JP) Q1 Beat: Record Backlog & Policy Tailwinds Support Premium Valuation

​MHI reports strong Q1 FY25 results with revenue and profit growth, record backlog, and solid growth prospects driving higher valuation compared to...

Rahul Jain

Mitsubishi Heavy (7011) – Strong Earnings, ¥10.2T Backlog, Macro Tailwinds Remain Supportive

​MHI's strong turnaround in revenue and profit, backed by a solid order backlog and promising guidance, supports long-term growth potential despite...

Rahul Jain

MHI (7011 JP): Take Profits

Take profits, but don't short the stock without an obvious catalyst (high valuation doesn't count). Rising Japanese defense outlays should drive...

Scott Foster

MHI (7011) | Rockets and Renewables

​MHI reports strong growth in Q2 2023, benefiting from global trends in decarbonization and defense spending, positioning itself as a leader in gas...

Mark Chadwick

MHI reports strong Q1 FY25 results with revenue and profit growth, record backlog, and solid growth prospects driving higher valuation compared to...

MHI's strong turnaround in revenue and profit, backed by a solid order backlog and promising guidance, supports long-term growth potential despite...

MHI reports strong growth in Q2 2023, benefiting from global trends in decarbonization and defense spending, positioning itself as a leader in gas...